Application of AirTouch Communications, Inc., Transferor and Vodafone Group, PLC, Transferee for consent to Transfer Control of Licenses and Authorizations.

Today, the Wireless Telecommunications Bureau releases an Order granting the
application of AirTouch Communications and Vodafone Group for consent to transfer control
of licenses and authorizations. I object to this bureau-level order and to the Commission's
arbitrary and ad hoc review process for license transfers. I explicitly join in Commissioner
Tristani's statement and support her request for this item to be considered by the entire
Commission.

On several occasions, I have objected to this agency's ad hoc process for reviewing
license transfers.(1) The Commission has pending before it numerous license transfers, of which
only a select few are singled out by the Commission for stricter scrutiny. I have repeatedly
objected to the fact that the Commission has not established a threshold test for determining
which license transfer applications should receive strict scrutiny, and what kinds of process the
Commission should utilize for such applications.

I first note that nothing in the Communications Act grants the Commission authority to
review mergers writ large. Rather, the licensing provisions of the Act require the Commission
to review applications for the transfer of station licenses. See id. section 310(d) ("No . . .
station license . . . shall be transferred . . . to any person except upon application to the
Commission and upon finding by the Commission that the public interest, convenience, and
necessity will be served thereby."). As I have noted in other contexts, there is a world of
difference between the business transaction known as a "merger" and a simple "license
transfer."(2) As such, I thus object to the competitive framework used by the bureau for
analyzing this "merger."

Nor does the Commission have any established procedures for the handling of
applications for license transfers. Any particular application on any particular day could be:
adopted at a Commission meeting; voted by the Commission on circulation; processed with or
without a formal hearing; processed with or without so-called "public fora"; handled with or
without additional private "talks" between the companies, interested parties, Commission staff,
and individual, especially interested members of the Commission; granted with or without
conditions; finalized after 90 days or 90 weeks, etc. The list goes on almost indefinitely.
Indeed, after today's decision, I must ask whether any particular application could even be
granted by the bureau, with or without conditions and regardless of the unique issues raised by
the application? Surely not!

But today's bureau-level decision confirms the arbitrary nature of this process as the
Chairman has instructed the bureau to issue an order over the objection of two Commissioners
that on its face admits to dealing with a "unique situation and contains terms that, if broadly
applied, would have significant consequences for the telecommunications industry." Supra at
par. 23. I object to the decision to deal with these new and novel policy issues at the bureau
level. I continue to believe that the Chief of the Wireless Bureau does "not have the authority
to act on any complaints, petitions or requests . . . [that] present new or novel questions of
law or policy which cannot be resolved under outstanding Commission precedent and
guidelines." 47 CFR 0.331(a)(2). I do not believe that this Commission rule has been altered
or removed. Neither has the bureau attempted to claim that this "unique situation" or the
terms that have "significant consequences for the telecommunications industry" could be
resolved under existing Commission precedent. Thus, I fail to see how the bureau has the
delegated authority to take today's actions and question whether it would be susceptible to
challenge.

Even more important, however, is how this order exemplifies the ad hoc nature of our
review process. Why does one application for license transfers receive a different level of
scrutiny from another? I am not able to determine any meaningful distinction between this
application and others currently pending before the Commission and do not understand why
this application may be approved by the bureau but other similar applications deserve more
exacting scrutiny.

Is this application being reviewed by the bureau because of the nature of the application
or request? No, as the AirTouch Vodafone application involves the transfer of license
pursuant to sections 214 and 310 of the Communications Act. These are the same provisions
that are involved in other applications that are receiving much more scrutiny.

Is it because of the size of the companies involved? No, as the new Vodafone
AirTouch will have a combined market capitalization of $110 billion and be the largest
wireless telecommunications company in the world.

Is it because of the uniqueness of the issues raised? No, as even the bureau
acknowledges that this application and the accompanying petitions raise a "unique situation"
and contain terms that would have "significant consequences for the telecommunications
industry" if more generally applied. Surely these are "new or novel" issues of law and policy
that must be decided by the Commission. Indeed, the Commission's rules limit the general
grants of delegated authority to the bureaus to "matters which are minor or routine or settled in
nature." 47 CFR 0.5(c). By definition issues that are "unique" and "significant" cannot at the
same time be "routine" and "minor."

Indeed, in our WTO Implementation Order, the Commission expressly stated that it
would consider any legitimate concerns regarding national security and law enforcement issues
in the context of a particular request for authorization.(3) The Commission has not clarified its
concerns or policies in this regard. Neither has it delegated such decisions to the bureau. As
such, the bureau is acting on these novel policy issues without guidance from the Commission.
I can only be left to conclude that the bureau's order actually violates the Commission's rules
that limit its delegated authority, and I am surprised that the bureau fails to address this
discrepancy.

Is it because outside parties have not objected or proposed conditions? No, as two
parties filed initial petitions to deny or condition the grant of authorization. Moreover, the
DOD/DOJ/FBI Agreement was also submitted, and these parties propose imposing the terms
of the agreement as a condition of our approval.

Finally, is it because no Commissioners have objected? No, Commissioner Tristani
asked that this item be considered by the full Commission. Is it because no two
Commissioners objected? No, I have also asked that this item be voted on by the full
Commission. But these requests have been denied.

In addition to my concerns regarding the ad hoc nature of this process, I am also
concerned about the fact that this agency has become an enforcer of the rules and regulations --
and at times merely the wishes -- of other governmental agencies. We have no jurisdiction to
enforce rules not promulgated under the Communications Act, see id. section 303(r) (referring
to conditions needed to "carry out the provisions of this Act"), and we cannot and should not
do the enforcement work of others. This is not to say that we should not take official notice, in
the course of making licensing decisions, of findings by another agency that an applicant has
violated a regulation in its bailiwick. We should certainly consider such findings in
determining whether to grant or deny a license application. But we should not condition such
a decision on compliance with another agency's regulation or condition, thus putting ourselves
in the position of potential enforcer of non-FCC rules should the transferee fail to conform.
But that is exactly what the Bureau has done by "impos[ing] a specific condition requiring
compliance with the DOD/DOJ/FBI Agreement." Supra at par. 22.

The evidence that we are merely acting as an enforcer of other agencies' conditions is
the fact that the Petition to adopt these conditions was received and acted upon by the Wireless
Bureau on the same day. I find it hard to believe that any "independent review" occurred
within the mere hours between receiving the Petition and accompanying conditions and
adoption. This agency should never impose conditions that have no basis in the text of the
Communications Act, thus using our license transfer authority to impose new substantive
obligations that Congress never contemplated.

I recently testified regarding the concerns that I have with the process -- or lack thereof
-- the Commission has established for license transfers before the Subcommittee on
Commercial and Administrative Law of the Committee on the Judiciary of the House of
Representatives.(4) At that time, I noted my concern that the lack of procedural rules placed too
much discretion in the hands of the Chairman:

Since there are no rules governing procedures (I do not think section 1.1 can
fairly be said to be a rule of anything except unfettered discretion), the
Commission (or even just the Chairman?) is free to change the procedural rules
of the road from transaction to transaction, and even in the midst of a single
transaction. Individual companies can be dragged through long and expensive
proceedings, with full-fledged Commission action, while others have their
applications promptly granted by the staff, with no rationale for the grossly
disparate treatment -- except for perhaps the cynical one that the Commission is
favoring certain industries or companies. And individual companies can be
subjected to this unprecedented processes at the direction, apparently, of the
Chairman himself, without consultation or agreement by the full Commission.
This is simply not the right way to run a licensing agency or to deal with the
licensees who pay the regulatory fees that fund this agency.

At that time I noted my concern with the Chairman trying to exercise such unfettered
discretion and my belief that the Commission should be more involved in these decisions.
Today, we see the Chairman exercising that discretion to deny two Commissioners the
opportunity to participate in the review of a substantial merger, with international ramifications
and that raises unique and novel issues. I am left asking what limits there are on the Bureau's
authority to act at the Chairman's direction?

While obviously troublesome on an intuitive level, the wholly ad hoc nature of this
process makes it all too easy for decisionmakers to discriminate among industries and even
companies - in other words, to engage in arbitrary and capricious review. As Senator McCain
recently pointed out in a letter to Chairman Kennard concerning the pending SBC/Ameritech
applications, the unpredictability of the Commission's procedures cast a pall on the
Commission's impartiality. Specifically, when the Commission subjects some parties to a
novel, extended, and unwieldy process to which it has not subjected similarly situated
applicants, a reasonable person might think that the decisionmakers possessed a bias -- a bias
manifesting itself in the especially high and numerous procedural hoops through which the
decisionmakers were forcing the companies to jump.

Unfortunately, the manipulation of procedural rules can be a cover for discrimination
on the merits. I fear that the Commission's arbitrary license transfer review process is subject
only to the whim of the Chairman. The public deserves more than such inherently arbitrary
and capricious decisions.

2. The Commission does possess authority under the Clayton Act, which prohibits combinations in restraint of
trade, to review mergers per se. See 15 U.S.C. section 21 (granting FCC authority to enforce Clayton Act where
applicable to common carriers engaged in wire or radio communication or radio transmission of energy). That
power is rarely invoked by the Commission, however. If the Commission intends to exercise authority over mergers
and acquisitions as such, it ought to do so pursuant to the Clayton Act, with its carefully prescribed procedures and
standards of review, not the licensing provisions of the Communications Act.

3. Rule and Policies on Foreign Participation in the U.S. Telecommunications Market, Report and Order on
Reconsideration, 12 FCC Rcd 23891, at par. 62 (1997).

Testimony of Federal Communications Commissioner Harold W. Furchtgott-Roth
Before the U.S. House of Representatives Committee on the Judiciary, Subcommittee
on Commercial and Administrative Law Oversight Hearing, Tuesday, May 25, 1999

Novel Procedures in FCC License Transfer Proceedings

Thank you for the opportunity to appear before your distinguished Subcommittee on
Commercial and Administrative Law. The topic for today's hearing is "Novel Procedures in FCC
License Transfer Proceedings."

At the outset, I would like to emphasize that debates about process are not trivial debates.
To the contrary, regularity and fairness of process are central to a governmental system based on
the rule of law. As the law recognizes in many different areas, the denial of a procedural right can
result in the abridgment of a substantive right. Not the least of these areas is administrative law,
the jurisdiction of this Subcommittee. The Administrative Procedure Act (APA) is grounded in
the notions that fair processes result in better regulations, and that participatory processes result
in regulations that people can accept, even if they disagree with them. Indeed, procedural fairness
is so fundamental a principle in our legal system that the Framers expressly guaranteed it in the
Constitution. See U.S. Const. Amdmt. V ("No person shall . . . be deprived of life, liberty, or
property, without due process of law. . . .").

It is no secret that I have been, and remain, deeply concerned about the novel procedures
currently being employed by the FCC in license transfer proceedings. My concerns arise out of
the legal problems with the processes and standards -- or more precisely, the lack thereof -- that
the Commission uses to evaluate applications for the transfer of licenses. The aggregate effect of
these problems, described in detail below, is to create an administrative scheme that undermines
the principles of fundamental fairness and procedural due process, the hallmarks of the APA.

The FCC Lacks "Merger" Review Authority Under the Communications Act

As a threshold matter, I would like to correct a common misperception about the scope of
the Commission's authority when reviewing license transactions involving merging parties.
Contrary to its frequent assertions, the Commission does not possess statutory authority under the
Communications Act to review, writ large, the mergers or acquisitions of communications
companies. Rather, that Act charges the Commission with a much narrower task: review of the
proposed transfer of radio station licenses from one party to another and review of the proposed
transfer of interstate operational authorizations for common carriers. Nothing in the
Communications Act speaks of jurisdiction to approve or disapprove the mergers that may
occasion a transferor's desire to pass licenses on to a transferee.(1)

Under that Act, the Commission
is, at most, required to determine whether the transfer of licenses

To be sure, the transfer of radio licenses and common carrier authorizations is an
important part of any merger. But it is simply not the same thing. A merger is a much larger and
more complicated set of events than the transfer of FCC permits. It includes, to name but a few
things, the passage of legal title for many assets other than radio licenses, corporate restructuring,
stock swaps or purchases, and the consolidation of corporate headquarters and personnel.

Clearly, then, asking whether the particularized transaction of a license transfer would
serve the public interest, convenience, and necessity entails a significantly more limited focus than
contemplating the industry-wide effects of a merger between the transferee and transferor. For
instance, in considering the transfer of licenses, one might ask whether there is any reason to think
that the proposed transferee would not put the relevant spectrum to efficient use or comply with
applicable Commission regulations; one would not, by contrast, consider how the combination of
the two companies might affect other competitors in the industry. One might also consider the
benefits of the transfer, but not of the merger generally. And one might consider the transferee's
proposed use and disposition of the actual licenses, but one would not venture into an
examination of services provided by the transferee that do not even involve the use of those
licenses, as the Commission often does.

By using the license transfer provisions of the Communications Act to assert jurisdiction
over the entire merger of two companies that happen to be the transferee and transferor of
licenses, the Commission greatly expands its organic authority. Certainly, in the context of a
merger, license transfers occur as a result of the merger, but the Commission should not use this
causative fact to bootstrap itself into jurisdiction over the merger. If control of licenses were to be
transferred "as a result of" a licensee's bankruptcy, would the Commission assert jurisdiction to
review the legal propriety of the declaration of bankruptcy? That would be preposterous, as that is
a job for a bankruptcy court. Review of the merger of two communications companies which,
just like the bankruptcy in my hypothetical, is an underlying cause of the transfer in question, is a
job for the Department of Justice. Expanding our review of license transfers to a review of the
event that precipitates the transfers -- whether that event is a merger, a bankruptcy, or any other
event that might lead a licensee to cede control of a license -- is off the statutory mark.

Despite the Commission's effort to exercise power over "mergers" under sections 214 and
310 of the Communications Act, it must be remembered that, in the end, the Commission can only
refuse to permit the transfer of the relevant licenses. While such action would no doubt threaten
consummation of a proposed merger, the Commission cannot -- despite its threats to do so in
licensing orders(3) -- directly forbid the stockholders of one company from selling their shares to the
other.

Put simply, the scope of FCC review ought to accord with the scope of our remedies: that
is, it ought to be limited to considering (i) whether the public would suffer harm if radio licenses
are transferred from Party A to Party B, and (ii) whether the public

convenience and necessity would be served by allowing Party A to convey authorizations to
operate carrier lines to Party B. The fact that most orders involving mergers do not even identify
the radio licenses or section 214 authorizations at issue or discuss the consequences of their
conveyance, but instead move directly to a discussion of the merger, reflects how far the
Commission has strayed from the provisions of the Act.

The exercise of power not authorized in the Communications Act is not just an
independent wrong: it also creates a violation of the Administrative Procedure Act. As the
members of this Subcommittee well know, the APA requires a reviewing court to "hold unlawful
and set aside agency action" that is "in excess of statutory jurisdiction, authority, or limitations."
5 U.S.C. section 706(2)(C). This critical provision of the APA provides enforcement of the
statutory limits on agency action and recourse for their transgression. Should the Commission
ever purport to prohibit a "merger" -- as opposed to the simple transfer of licenses -- I believe
that action would violate this linchpin of the APA.

Moreover, if the Commission stuck closely to its statutory authority, the adverse affects of
the procedural practices that you have asked me to testify about today, while still legally
problematic, would be greatly mitigated as a practical matter.

Potentially Arbitrary Review: Choice of Transfers for Full-Scale Review, Procedures to be
Employed, and Substantive Standards To Be Applied

Beyond the threshold question of statutory authority to regulate mergers, I have grave
concerns about the process employed in FCC merger reviews, the subject of today's hearings.

The Commission annually approves tens of thousands of license transfers without any scrutiny or
comment, while others receive minimal review, and a few are subjected to intense regulatory
scrutiny. For example, mergers of companies like Mobil and Exxon involve the transfer of a
substantial number of radio licenses, many of the same kind of licenses as those at issue in other
high-profile proceedings, such as AT&T/TCI, and yet we take no Commission level action on
those transfer applications. I do not advocate extensive review of all license transfer applications,
but mean only to illustrate that we apply highly disparate levels of review to applications that arise
under identical statutory provisions.

Unfortunately, there is no established Commission standard for distinguishing between the
license transfers that trigger extensive analysis by the full Commission and those that do not. Nor
do any of the Commission's orders in "merger" reviews elucidate the standard. Unfortunately, the
orders tend to conclusorily assert that some mergers warrant heavy review and others do not.(4)
This is not a very helpful explanation. Regulated entities and even their often sophisticated
counsel are left to wonder: Is the question whether the merging firms are large, successful
corporations? (That is one of the obvious differences between the mergers that receive heavy
attention from the Commission and those that do not.) Does the level of review depend on the
type of services offered by the merging companies, i.e. a telephone/cable merger (such as
AT&T/TCI) gets one sort of review, while a telephone/telephone merger (such as
SBC/Ameritech) gets another? In short, merging parties have no clear notice as to the threshold
showing for determining the scale of FCC license transfer review.

If the answer is, as some have suggested, that the Commission reviews extensively only a
subclass of license transfer applications -- those occasioned by mergers with the potential to affect
the telecommunications industry -- that response is incomplete. Whatever the soundness of this
theory for distinguishing among transfer applications, it is not written

anywhere, whether in agency rules, regulations, policy statements, or even internal agency
guidelines. While the Communications Act does allow the Commission to make reasonable
classifications of applications, see 47 U.S.C. section 309(g), the Commission has in no way done
so, much less in a way that puts the public on notice as to what those classifications are. Agency
decisions regarding which license transfers to review, even as among license transfers occasioned
by mergers, are entirely ad hoc and thus run a high risk of being made arbitrarily.

Nor does the Commission have any established procedures for the handling of applications
for license transfers. Any particular application on any particular day could be: adopted at a
Commission meeting; voted by the Commission on circulation; processed with or without a
formal hearing; processed with or without so-called "public fora"; handled with or without
additional private "talks" between the companies, interested parties, Commission staff, and
individual, especially interested members of the Commission; granted with or without conditions;
finalized after 90 days or 90 weeks, etc. The list goes on almost indefinitely.

Section 1.1 of the Practice and Procedure subpart of the Commission's rules, entitled
"Proceedings before the Commission," does nothing to remedy the open-ended nature of
Commission processes. It states that "[t]he Commission may on its own motion or petition of any
interested party hold such proceedings as it may deem necessary from time to time" and
"[p]rocedures to be followed by the Commission shall . . . be such as in the opinion of the
Commission will best serve the purposes of such proceedings." 47 C.F.R. section 1.1. This rule,
written by the Commission, establishes only that the Commission can do essentially whatever it
wants. There is nothing constraining or useful about this section.

Moreover, this rule -- the only general one about procedures on the Commission's books -- is routinely flouted. Section 1.1. allows "the Commission" to decide on appropriate procedures.
Under the Communications Act, "the Commission" is defined as being "composed of five
Commissioners appointed by the President, by and with the advice of the Senate, one of whom the
President shall designate as chairman." 47 U.S.C. section 4(a). During my tenure, however,
important procedural issues have not been decided upon by the full Commission, as section 1.1.
requires; rather the Chairman seems to believe that he can set procedural rules on his own. This is
contrary, however, to the little that section 1.1 actually does require -- namely, full Commission
action.

The extraordinary process to which SBC and Ameritech are now being subjected -- which
includes "discussions" between the companies and Common Carrier Bureau staff unauthorized by
the full Commission, with Chairman-set "ground rules" that are wholly unenforceable and thus
subject to change at his personal whim -- is illustrative of what happens when there are no limits
on Commission discretion with respect to procedures.(5)

Since there are no rules governing procedures (I do not think section 1.1 can fairly be said
to be a rule of anything except unfettered discretion), the Commission (or even just the
Chairman?) is free to change the procedural rules of the road from transaction to transaction, and
even in the midst of a single transaction. Individual companies can be dragged through long and
expensive proceedings, with full-fledged Commission action, while others have their applications
promptly granted by the staff, with no rationale for the grossly disparate treatment -- except for
perhaps the cynical one that the Commission is favoring certain industries or companies. And
individual companies can be subjected to this unprecedented processes at the direction,
apparently, of the Chairman himself, without consultation or agreement by the full Commission.
This is simply not the right way to run a licensing agency or to deal with the licensees who pay the
regulatory fees that fund this agency.

Finally, if the Commission did establish a threshold test for determining which license
transfer applications should receive strict scrutiny, and what kinds of process it should utilize, the
Commission would still need to set out the substantive tests for the differing scrutiny levels. As a
general matter, our decisional precedents provide little concrete guidance on the substantive
standard for approval of Title II or Title III license transfers: the proposition that a merger is in
the "public interest" if it is not anti-competitive (or if it is also pro-competitive) is too generalized
to be of any real help. Moreover, there is clearly a different "public interest" test being applied,
sub silentio, in different cases under the same statutory provisions, usually sections 310 and 214.
The cases that undergo extensive inquiry exhaustively discuss all kinds of service areas and issues
ancillary to the use of the actual radio licenses, and the decisions that are granted at the Bureau
level are relatively perfunctory in their public interest analysis. We should, after identifying the
threshold test for license transfers that warrant thorough inquiry, articulate clearer substantive
criteria to guide the Commission's inquiry

The long and short of it is this: regulated entities have little basis for knowing, ex ante,
how their applications will be treated, either procedurally or substantively. The license transfer
process at the Commission is lacking in any transparent, fixed and meaningful standards. A
person -- even a well-trained lawyer -- who wished to prepare for this process could find scant
guidance in public sources of law, such as the Code of Federal Regulations or the Commission's
adjudicatory orders. Rather, one would have to be trained in the unwritten ways of this
Commission to know what to expect, and those expectations unfortunately would have little
relation to federal administrative law.

While obviously troublesome on an intuitive level, such a license transfer process suffers
from at least four particular flaws under the APA. First, the wholly ad hoc nature of this process
makes it all too easy for decisionmakers to discriminate among industries and even companies - in
other words, to engage in arbitrary and capricious review. Protecting against such
decisionsmaking is, of course, a core function of the Administrative Procedure Act. See 5 U.S.C.
section 706(2)(A) (reviewing court must '"aside agency action . . . found to be arbitrary [and]
capricious").

Second, and relatedly, by failing to state clearly the principles that it uses to judge license
transfers, the Commission decreases the viability of meaningful judicial review. The net result is
to undermine the statutory right of aggrieved parties to judicial review. See id. section 702 ("A
person suffering legal wrong because of agency action, or adversely affected or aggrieved by
agency action within the meaning of a relevant statute, is entitled to judicial review thereof.").
That right of review is an interested party's primary defense against arbitrary agency decisions.

Third, the nonascertainable nature of the license transfer process means that interested
parties have no fair notice as to the regulatory constraints on their conduct. Notice of what the
law requires -- i.e., which behavior is prohibited and which is permissible -- is a bedrock element
of fairness in our legal system, derivative of the Due Process Clause. No person should be
penalized for violating a rule that is either so vague as to give no clear indication of the prescribed
conduct, or entirely unpublished and thus unavailable to the public, residing only in the minds of
regulators. The notice and comment procedures of the APA are designed to safeguard against
lack of fair notice. They require notification, and an opportunity to participate in the making, of
the standards that govern interested parties. See id. section 553(b)-(c). Indeed, the whole
rulemaking system of the APA is based on the assumption that governing standards will be
published and public before they go into effect, allowing regulated parties a certain amount of
time to conform their conduct to the new federal standards. See id. section 553(d) ("The required
publication or service of a substantive rule shall be made not less than 30 days before its effective
date. . . .").

Finally, as Senator McCain recently pointed out in a letter to Chairman Kennard to
concerning the pending SBC/Ameritech applications, the unpredictability of the Commission's
procedures cast a pall on the Commission's impartiality. Specifically, when the Commission
subjects parties to a novel, extended, and unwieldy process to which it has not subjected similarly
situated applicants, a reasonable person might think that the decisionmakers possessed a bias -- a
bias manifesting itself in the especially high and numerous procedural hoops through which the
decisionmakers were forcing the companies to jump. Unfortunately, the manipulation of
procedural rules can be a cover for discrimination on the merits. The appearance of partiality
created by the use of such highly unusual procedures contravenes the core principle of the APA
(again based on the constitutional concerns of procedural due process) that decisionmakers be
neutral. See 2 Davis & Pierce, Administrative Law Treatise at page 67 (3d ed. 1994) ("Due
process requires a neutral, or unbiased, adjudicatory decisionmaker. Scholars and judges
consistently characterize provision of a neutral decisionmaker as one of the three or four core
requirements of a system of fair adjudicatory decisionmaking.").

To quote Senator McCain:

A proceeding of . . . importance and potential consequences must be attended, not only
with every element of fairness, but with the very appearance of complete fairness. That is
the only way its conduct will meet the basic requirement of due process. Amos Treat and
Co., Inc. v. SEC, 306 F.2d 260 (D.C.Cir. 1962). The Commission's objectivity and
impartiality are unavoidably opened to challenge by the adoption of procedures from
which a disinterested observer may conclude that it has in some measure adjudged the
facts as well as the law a case in advance of fully hearing it. See, e.g., Gilligan , Will &
Co. v. SEC, 267 F.2d 461 (D.C.Cir. 1959).

Letter from Sen. John McCain to Chairman William E. Kennard, May 12, 1999.

For the above reasons, it seems to me that the Commission's lack of guidelines regarding
the process and substance of license transfer proceedings is in serious tension with the principles
that undergird the APA.

The statutory test to be applied to license transfers is, of course, the "public interest"
standard. As noted above, the Commission has failed to place any outer limits whatsoever on this
concept, freely reinterpreting the standard in each new case. Not only does the Commission's lack
of clear guidelines with respect to standards governing license applications present issues of
arbitrary decisionmaking and of fair notice, as discussed above, it may also create constitutional
issues with respect to the non-delegation doctrine.

This month, the United States Court of Appeals for the D.C. Circuit ruled in American
Trucking Ass'n v. EPA, 1999 WL300618 (May 14, 1999) that the EPA's failure to adopt
"intelligible principles" for implementing its statutory mandate to regulate air pollution effected an
unconstitutional delegation of legislative power. The Court explained that "[w]here . . . statutory
language and an existing agency interpretation involve an unconstitutional delegation of power,
but an interpretation without the constitutional weakness is or may be available, our response is
not to strike down the statute but to give the agency an opportunity to extract a determinate
standard on its town." Id. at *6. According to this case and its precedential forebears, see
International Union, UAW v. OSHA, 938 F.2d 1310 (D.C. Cir. 1991), this agency has a
constitutional duty to choose interpretations of statutory language that avoid, rather than create,
non-delegation doctrine problems.

I believe that the FCC has not satisfied its obligation under American Trucking to adopt
"determinate, binding standards," 1999 WL 300618 at *6, in order to channel its discretion under
the "public interest" provisions. Putting aside the question of the breadth of the statutory
standard itself, the Commission has not articulated any clear principles about what that standard
means in the context of merger review; how it applies to different entities; and what justifies a
departure from standard practice, to name just a few of the major outposts on the license transfer
trail. In short, there are no self-defined limits -- at either end of the spectrum -- on the
Commission's consideration of whether to grant or deny a license transfer when mergers are
involved, or otherwise. To my mind, this is arguably the kind of "free-wheeling authority [that]
might well violate the nondelegation doctrine." International Union, UAW v. OSHA, 938 F.3d at
371.

I have always thought that it was incumbent on the Commission to fashion some
guidelines to place limits on its discretion as a matter of simple fairness. Under American
Trucking and International Union, it would appear that the Commission also has a constitutional
duty to do so. This duty it has not even attempted to carry out.

"Conditional" Approval of License Transfer Applications

Finally, I express some general apprehension about the "conditioning" of grants for license
transfer applications and section 214 authorizations. I think it is entirely appropriate, under the
Commission's organic statute, for the Commission to condition license transfer and line extension
applications on compliance with existing FCC rules or statutory provisions. See 47 U.S.C. section
303(r) ("Commission shall . . . prescribe such . . . conditions, not inconsistent with law, as may be
necessary to carry out the provisions of this Act"); id. section 214(c) (Commission "may attach to
the issuance of [214] certificate such terms and conditions as in its judgment the public
convenience and necessity may require").

All too often, however, this Commission places conditions on license transfers that have
no basis in the text of the Communications Act. That is, the Commission requires companies to
do certain things -- things that it could not for lack of statutory authority require outright in a
rulemaking -- as a quo for the quid of receiving a license. Again, this represents a transgression
of the Commission's statutory limits and thus a violation of the APA. See 5 U.S.C. section
706(2)(C). It could also constitute an evasion of the notice and comment provisions of the APA,
if the Commission (assuming it follows its own decisional precedent) uses its licensing orders to
create standards that logically apply industry-wide. See id. section 553.

I am also concerned about situations in which this agency becomes an enforcer of the rules
and regulations of other governmental agencies. We have no jurisdiction to enforce rules not
promulgated under the Communications Act, see id. section 303(r) (referring to conditions
needed to "carry out the provisions of this Act"), and we cannot and should not do the
enforcement work of others. This is not to say that we should not take official notice, in the
course of making licensing decisions, of findings by another agency that an applicant has violated
a regulation in its bailiwick. We should certainly consider such findings in determining whether to
grant or deny a license application. But we should not

condition such a decision on compliance with another agency's regulation, thus putting ourselves
in the position of potential enforcer of non-FCC rules should the transferee fail to conform to that
regulation. For instance, if the Department of Justice enters into an antitrust agreement with a
party, we have no business attempting to enforce the obligations created thereunder in our
licensing orders.

I am doubly concerned about conditional FCC approval when the rule at issue is not just
that of another agency, but when that agency has made no formal, final, and material findings of a
violation. That is, I do not think we should take official notice of alleged violations, including
matters under investigation or in litigation, or of informal concerns that an agency is not yet ready
or willing to pursue through their own established procedures. When we give formal weight to
anything short of formal, final findings by other agencies, we create a situation that is rife with
incentives for inter-agency gaming of the system, e.g., registering an objection with an agency
about a matter that the complaining agency is not prepared to pursue itself, and requires the
Commission to do extensive reviews in areas where it simply has no experience or authority.

In sum, at the intersection of two areas -- non-FCC rules and no final determination of a
violation by a responsible entity -- our authority to impose conditions on a license or 214
authorization transfer is at its weakest. Where non-FCC rules are at issue but there is a final,
record finding of a material infraction thereof, there is a middle ground: we should take

notice of that fact in deciding upon the application but not condition approval upon compliance.
Finally, where extant FCC rules are involved, our power to condition a proposed transfer upon
compliance with those rules and to enforce compliance, if necessary, is at its apex. We should
never, however, impose conditions that have no basis in the text of the Communications Act, thus
using our license transfer authority to impose new substantive obligations that Congress never
contemplated.

Conclusion

For the reasons discussed above, I believe that the Commission's failure to establish,
pursuant to notice and comment, public and intelligible principles to channel the exercise of
authority delegated by Congress raises serious questions under the APA and the Constitution. In
particular, the use of extraordinary processes in individual, high-profile cases threatens to
undermine both the procedural and substantive rights of regulated entities. I further believe that
the Commission's practice of attaching "conditions" to license transfers that lack a basis in the
Communications Act or extant Commission rules, or that purport to enforce the judgments of
other federal agencies, is also legally troublesome.

As an "independent" agency, composed of unelected officials who have no direct
accountability to the American public, I believe that we should proceed with heightened reserve
when exercising discretionary functions. If we so proceeded, we could better stay within the
bounds of our statutory authority, mitigate the potential for arbitrary decisionmaking, safeguard
the rights of judicial review, provide regulated entities with fair notice of the procedural and
substantive rules governing their applications, avoid the appearance of impartiality, and steer clear
of the non-delegation doctrine. In short, we could better serve the rule of law.

1. 47 U.S.C. section 310(d) provides: "No . . . station license . . . shall be transferred . . . to any person except
upon application to Commission and upon finding by the Commission that the public interest, convenience, and
necessity will be served thereby," i.e., by the license transfer. Section 214(a) states: "No carrier shall undertake the
construction of a new line or of an extension of any line, or shall acquire or operate any lines, or extension thereof,
or shall engage in transmission over or by means of such additional or extended lines, unless and until there shall
first have been obtained from the Commission a certificate that the present or future public convenience and
necessity require or will require the construction, or operation, or construction and operation, of such additional or
extended line." Notably, section 214(a) contains no "public interest" language at all.

2. The Commission does possess authority under the Clayton Act, which prohibits combinations in restraint of
trade, to review mergers per se. See 15 U.S.C. section 21 (granting FCC authority to enforce Clayton Act where
applicable to common carriers engaged in wire or radio communication or radio transmission of energy). That
power is rarely invoked by the Commission, however. If the Commission intends to exercise authority over
mergers and acquisitions as such, it ought to do so pursuant to the Clayton Act, not the licensing provisions of the
Communications Act.

3. See, e.g, In the Matter of Applications for Consent to the Transfer of Control of Licenses and Section 214
Authorizations from Tele-Communications, Inc., Transferor, AT&T Corp., Transferee, CS Docket No. 98-178
(released Feb. 18, 1999), at para. 112 (purporting to prohibit the applicants from "consummat[ing] the merger").

4. See, e.g., Applications for Consent to the Transfer of Control, supra n. 3, at para. 16 (stating, without
elaboration, that "the face of some merger applications may reveal that the merger could not frustrate or

undermine our policies").

5. I express, of course, no view on the merits of this application. My exclusive focus here is on the process that
employed to evaluate it. Accordingly, nothing in my testimony should be taken as reflective of any opinion on the
question whether SBC and Ameritech are in compliance with Commission rules.